Airtel launches India’s first payments bank

Mumbai: Airtel Payments Bank Ltd on Wednesday became the first payments bank to start operations, offering services in Rajasthan in a limited scale.

The payments bank is testing systems and processes ahead of a full scale, pan-Indian launch, the company said in a statement. Customers will be offered an interest rate of 7.25% on deposits in savings account, higher than the 4-6% commercial banks are offering, it said.

The pilot will run at 10,000 Airtel retail outlets where basic banking services will be provided.

Airtel Payments Bank is planning to expand its merchant network in Rajasthan to 100,000 by the end of the year, the statement said.

Bank accounts can be opened by customers without documents using Aadhaar based e-KYC. The subscriber’s mobile number would function as a bank account number and transfer from Airtel to Airtel phone numbers would be free.

The bank is not offering any debit card facility right now, it said. The bank was the first applicant to receive the final licence from the Reserve Bank of India (RBI) in April. Kotak Mahindra Bank holds 19.9% in the Airtel Payments Bank.The retail outlets, which will act as banking points, will offer account opening services, cash deposit and withdrawal facilities. As a payments bank it cannot perform lending activities, except while giving loans to its employees on approval of the board. The bank can, however, accept deposits of as much as Rs1 lakh.

According to RBI guidelines issued in November 2014, a payments bank will maintain cash reserve ratio with the central bank. Apart from it, they will be required to invest minimum 75% of their deposits in statutory liquidity ratio eligible government securities with maturity up to one year and hold maximum 25% in current and time deposits with other scheduled commercial banks for operational purposes and liquidity management, the guidelines said.

In August last year, the central bank had given in-principle approval to 11 applicants to set up payments bank by February 2017. Out of the 11 applicants, Cholamandalam Investment and Finance Co., Tech Mahindra Ltd and billionaire Dilip Shanghvi have already given up their approvals.